While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to the six-month time frame, Mad Day Trader, provided by Bill Davis, will exploit money-making opportunities over a brief ten minute to three-day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
Today, I would like to make a suggestion on a debit spread. I am going to suggest you use the January 31st expiration day.
The stock is Dollar General (DG).
DG is trading around $152.88 as I write this.
My suggestion today is this:
Buy to Open January 31st - $152.50 call @ $2.90
Sell to Open January 31st - $155.00 call @ $1.70
Net debit is $1.20 per spread with a maximum gain of $1.30 per spread if DG trades above $155.00 by January 31st.
Based on the nominal portfolio, limit the trade to 6 spreads or 0.7% of the portfolio.